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"We see Hughes Telecom as a major broadband service provider...." - Views on News from Equitymaster
 
 
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  • Dec 22, 2001

    "We see Hughes Telecom as a major broadband service provider...."

    Mr. Prakash C. Bajpai is the President and Chief Executive Officer of Hughes Tele.com (India) Ltd. He is spearheading the company's effort in building the country's first broadband network to support voice, data and web application. Mr. Bajpai has 22 years experience in the electronics industry and has held management positions in IBM, AT&T Network Systems and Tata Lucent.

    In an interview with Equitymaster, Mr. Bajpai shared his views on various issues like regulatory scenario and emerging trend in the Indian telecommunication sector.

    EQM: How do you rate the progress of Hughes Tele.com since IPO? Have there been any changes in the expansion plans of the company?

    Mr. Bajpai: Hughes Telecom has progressed well over the past year after our IPO despite numerous constraints. Our network has expanded significantly and we now supply services to over 110,000 customer lines in 10 cities in Maharashtra & Goa. Our overall project build out plan remains largely unchanged although we continuously make fine adjustments to the plan based on the market demand and improvements in technology; for example we have implemented our Broadband PMP (Point-to Multi-Point) wireless system 2 years ahead of schedule as we felt that this technology could be immediately deployed to fulfill our customers needs. HTIL's PMP installation is one of the largest successful implementations of PMP around the world and is a showcase of the technical capability of HTIL and our Sponsors, Hughes Network Systems, USA.

    EQM: Subscriber base growth seems to be slowing down in recent quarters. What are the reasons for this? Has the slowdown in the economy necessitated any change in the targets set by the company during the IPO at all?

    Mr. Bajpai: Our subscriber base has grown 400% to over 110,000 at present from 22,000 at the time of the IPO. During the initial years of a network build out in India, the monsoons restrain subscriber growth. During the monsoons we are unable to expand our network, as the municipal corporation does not permit anybody to trench the roads and lay cables. This limits us to adding new subscribers only in those areas where our network coverage exists. After the monsoons, trenching has recommenced and during the next 4 months we expect a substantial increase in our subscriber base as our network expands and covers new areas. After our major network build out is completed by 2004, the monsoons will cease to be a major factor affecting subscriber growth.

    The economic slowdown has impacted industry and services and we have also been temporarily impacted. The weak economy has forced corporates and businesses to reduce their overhead costs including communication costs. While our total revenues continue to grow, lower call traffic per user has resulted in a marginal decline in our average revenues per user. However, demand for our service remains high as HTIL continues to have an order book of over 35,000 lines in areas where we do not yet have network availability or face other capacity constraints. Over the next 4 months, as our network build out progresses, we expect to be able to rapidly grow our subscriber lines in service.

    EQM: What are the new growth avenues are you keen tapping in the near future? Does Hughes Tele plan to enter into the ILD segment?

    Mr. Bajpai: A new growth opportunity is broadband services. We have recently launched a high quality ADSL technology based broadband service and provide our customers a choice of service options and price points to match their needs. Initially, this service was provided to a select few customers. These customers have given us excellent reviews and we now intend to widen the coverage area for these services. We also intend to tie-up with a number of service providers like IDCs, ISPs and ASPs so that our customers may access these services using our broadband access service.

    The recent TRAI recommendations on ILD are very conducive for our entry into ILD services. Bombay is the largest ILD market in India and HTIL services most of the businesses who generate ILD traffic making ILD services an attractive opportunity for us.

    EQM: What is the current stage of the proposed merger of Hughes Tele with Tata Teleservices? How do you see the merger benefiting both the companies?

    Mr. Bajpai: We are unable to discuss the proposed combination due to confidentiality reasons.

    EQM: Hughes Electronics has plans to set up a subsidiary for providing broadband applications. With Hughes Tele already in this segment, do you see the new company competing is similar area of operations?

    Mr. Bajpai: Hughes Electronics is a world leader in satellite based broadband services, which can be provided in geographically widely dispersed areas whereas HTIL is providing terrestrial broadband services within its circle. The applications for the 2 services are different so we see very little competition while there will be opportunities for cooperation.

    EQM: The regulator has been unable to take a clear stand on issues like Wireless in Local Loop (WiLL). What is your opinion on such issues?

    Mr. Bajpai: The regulator, TRAI, has taken a clear stand on introducing WLL limited mobility. Other interested parties have now taken the issue to the TDSAT. We believe that WLL is the most economical technology to provide telecom services to a vast majority of people who do not yet have fixed line services. There is no other viable alternative to meet the objective of providing access to telecom services universally.

    EQM: What are the other regulatory issues that you would like the TRAI and the Telecom Ministry to address to accelerate growth in the Indian telecom sector?

    Mr. Bajpai: We believe that the NTP 99 policy should be implemented in letter and in spirit. As yet, a number of policy tenets of NTP 99 have not yet been implemented. The major unimplemented policies are level playing field for all operators, free connectivity between operators, USO norms and tariff rebalancing.

    EQM: With consolidation in full swing, how many players do you expect to dominate the basic telephony segment five years down the line?

    Mr. Bajpai: We expect 5-6 players to remain in this business a few years down the line.

    EQM: What do you see as the outcome of the recent global unrest on the Indian telecommunication industry? Could FDI be adversely affected?

    Mr. Bajpai: While any unrest leads to a short-term increase in risk perceptions in the medium and long term we expect FDI to be unaffected by this unrest. India is at a very early stage of the telecom growth cycle and there is a vast and growing unfulfilled demand for telecommunication services. To meet this need India needs large investments in network infrastructure and services. These investments will have to come from both domestic Indian as well as foreign sources. Due to the large investments required and long gestation period of projects, FDI in telecom is a function of the regulatory policies and earnings potential and will not be affected by temporary unrest.

    EQM: Where do you see Hughes Tele.com three years down the line?

    Mr. Bajpai: We see Hughes Telecom as a major broadband service provider able to fully meet the technical challenges and capitalize on the opportunities that will emerge due to the convergence of

  •   Voice and data,
  •   Internet and networks,
  •   Fixed and mobile services.

     

     

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